Version 1.0 General Certificate of Education (A-level) June 2012 Business Studies BUSS1 (Specification 2130) Unit 1: Planning and Financing a Business Mark Scheme
Mark schemes are prepared by the Principal Examiner and considered, together with the relevant questions, by a panel of subject teachers. This mark scheme includes any amendments made at the standardisation events which all examiners participate in and is the scheme which was used by them in this examination. The standardisation process ensures that the mark scheme covers the candidates responses to questions and that every examiner understands and applies it in the same crect way. As preparation f standardisation each examiner analyses a number of candidates scripts: alternative answers not already covered by the mark scheme are discussed and legislated f. If, after the standardisation process, examiners encounter unusual answers which have not been raised they are required to refer these to the Principal Examiner. It must be stressed that a mark scheme is a wking document, in many cases further developed and expanded on the basis of candidates reactions to a particular paper. Assumptions about future mark schemes on the basis of one year s document should be avoided; whilst the guiding principles of assessment remain constant, details will change, depending on the content of a particular examination paper. Further copies of this Mark Scheme are available from: aqa.g.uk Copyright 2012 AQA and its licenss. All rights reserved. Copyright AQA retains the copyright on all its publications. However, registered centres f AQA are permitted to copy material from this booklet f their own internal use, with the following imptant exception: AQA cannot give permission to centres to photocopy any material that is acknowledged to a third party even f internal use within the centre. Set and published by the Assessment and Qualifications Alliance. The Assessment and Qualifications Alliance (AQA) is a company limited by guarantee registered in England and Wales (company number 3644723) and a registered charity (registered charity number 1073334). Registered address: AQA, Devas Street, Manchester M15 6EX.
Assessment Objectives The Assessment Objectives represent those qualities which can be demonstrated in candidates wk and which can be measured f the purposes of assessment. AO1 Demonstrate knowledge and understanding of the specified content AO2 Apply knowledge and understanding to problems and issues arising from both familiar and unfamiliar situations AO3 Analyse problems, issues and situations AO4 Evaluate, distinguish between and assess appropriateness of fact and opinion, and judge infmation from a variety of sources Quality of Written Communication Students give accurate definitions of relevant terms. Students can also gain credit f identifying a point relevant to the question. Students should apply their knowledge to the business context in which the question is set, through recognition of some specific business aspect, the management of the business the problems issues faced by the business. Students will not be rewarded f simply dropping the company name product categy into their answer. Students use relevant business they and select infmation from a range of sources, using appropriate methods, to analyse business problems and situations. F example, students may be asked to build up an argument that shows understanding of cause and effect. Students evaluate evidence to reach reasoned judgements. This can be shown within an answer, through the weighting of an argument it can also be shown within a conclusion, perhaps by weighing up the strength of the student s own arguments f and against a proposition. Students will not gain credit by the simple use of drilled phrases such as on the other hand business operates in an ever-changing environment. The quality of written communication is assessed in all assessment units where students are required to produce extended written material. Students will be assessed accding to their ability to: ensure that text is legible, and that spelling, grammar and punctuation are accurate, so that meaning is clear. select and use a fm and style of writing appropriate to purpose and complex subject matter ganise infmation clearly and coherently, using specialist vocabulary when appropriate The assessment of the quality of written communication is included in Assessment Objective 4. 3
ADDITIONAL GUIDANCE FOR MARKING SCHEME This marking scheme requires decisions to be made on whether students responses represent reasonable good application and reasonable good analysis. If a response demonstrates good analysis and good application, award Level 5 full marks. Alternatively, if a response does not contain any relevant knowledge then a mark of zero would be appropriate. In making a decision about whether a particular response is good reasonable, use the following guidelines. APPLICATION Good application can be demonstrated in three ways and annotated as GAp. By being consistently in context. An answer may not demonstrate either of the above characteristics, but it may be in context throughout with each argument related to the scenario. By combining data. F example, in responding to Question 2(a), a student might achieve good marks f application by using Figure 2 in der to show how a profit is budgeted f each quarter and the estimate of fixed costs of 6000 f the first quarter. Combining this with the infmation that Zoe has 6000 in savings means that Zoe s personal finance is just enough to cover the start-up costs of the business. By manipulating data. F example, when answering Question 2(c) students might use the data in Figure 2 and infmation in the text to confirm that Zoe s shtfall of 2000 meant that she had still generated a surplus of 2500 ( 4500 2000), despite a number of serious problems that were outside her control. Consequently, she was still on target f a profit in excess of 15 000. F application to be creditwthy, it must be used as part of a relevant argument. Some students simply copy out part of the case. This should not receive credit. If a student, when developing an argument, makes a single reference to the context, this is reasonable application. Annotate this as RAp. An example of this in answering Question 1(d) could be that a problem of estimating her budget was that unexpected events might occur, citing the case of Zoe s car problems as an example. ANALYSIS Good analysis takes place when overall an answer shows effective use of business reasoning/logic in answering the question. Annotate as GAn. Good analysis can also be shown when a student develops an extended chain of argument with a clear focus on the question. F example, when responding to Question 2(b), a line argument could show how Zoe s problems tended to come from external facts, which she seemed to largely igne in her market research, rather than a lack of understanding of the nature of her market (which was the area of market research that appeared to be her relative strength). Reasonable analysis will be shown through less developed chains of argument those with a less clear focus on the question. Annotate as RAn. F example, in Question 2(c) the possible, but not certain, changes in the quality and cost of her supplies might make it harder f Zoe to reach her profit target. Simple points ideas expressed without any development would be rewarded with knowledge marks. EVALUATION The driving fce behind the award of evaluation marks is the quality of evaluation included in the answer and not the Quality of Written Communication. The key is the extent of the suppt f a judgement. Evaluative comments may be offered throughout a response and may suppt a judgement fully. The decision on the Quality of Written Communication should be used to adjust a mark within the level selected on the basis of the student s evaluation. F example, a student may have been awarded the lower mark in E3 f evaluation but the response may be particularly well structured with highly effective use of technical terms. In this case, the mark may be adjusted upward to the maximum f E3. A well written answer without any evaluation can receive one mark f quality of language. 4
1 Total f this question: 20 marks 1 (a) What is meant by the term fixed costs (lines 26)? (2 marks) Definition: Expenditure that does not vary directly (remains the same) (1 mark) (first mark) with changes in output (1 mark) OR in the sht-run (1 mark). 1 (b) Calculate the total added value that Zoe expected to receive from party bags in the first three months of her business (November 2011 to January 2012). (3 marks) Crect answer = 1125 (3 marks). Also accept 1125 (without the sign). Break-down of calculations shown below: Sales revenue: 2700 Cost of party bags: 1575 2700 1575 = 1125 (1 mark) (1 mark) (1 mark) If answer shown is 50 625 (2 marks) If no valid calculation, award a maximum of 1 mark f notion/definition of added value. Added value = Sales revenue minus cost of bought-in materials (1 mark) 1 (c) Calculate Zoe s budgeted profit loss from her first year of trading (November 2011 to October 2012). Crect answer = 18 750 (3 marks). Also accept 18 750 (without the sign). Break-down of calculations shown below: EITHER Total income = 9 000 + 9 000 + 12 000 + 15 000 = 45 000 (1 mark) Total expenditure = 17 250 + 2 250 + 3 000 + 3 750 = 26 250 (1 mark) Or 8 250 + 5 250 + 6 000 + 6 750 = 26 250 (1 mark) 45 000 26 250 = 18 750 (1 mark) OR Quarterly profits are: 750 + 3 750 + 6 000 + 8 250 (1 mark f crect calculation of any one of the 4 quarters) + (1 mark f crect calculation of other three quarterly profits) 750 + 3 750 + 6 000 + 8 250 = 18 750 (1 mark) If no creditwthy calculation, award a maximum of 1 mark: Budgeted profit = Budgeted income minus budgeted expenditure (1 mark) (3 marks) 5
1 (d) Explain two problems that Zoe faced in estimating her expenditure budget accurately. (6 marks) Level Descript Marks L3 Good application 6 5 L2 Good knowledge Reasonable application 4 3 L1 Limited knowledge 2 1 Definition: Expenditure budget: the agreed targeted/planned/fecast (1 mark) costs/expenses of a business over a period of time (1 mark). Problems might include the following: she had no previous knowledge of the party bag contents and their costs suppliers might change their prices befe she started trading costs might be affected by unexpected events, such as a car breakdown changes in the economy and her own popularity could lead to lower demand. This would make it difficult f Zoe to estimate her variable costs, such as materials f party bags. NB: Do not accept arguments that relate only to the income budget. However, accept arguments that clearly relate to the quantity of materials being purchased by Zoe. 6
1 (e) The break-even chart below (Figure 3) shows the iginal break-even situation f Zoe s business. However, the increase in supplier costs of party bags will lead to an increase in variable costs from 50 per party to 70 per party. Amend the break-even chart below to show: (i) the new total costs line after the increase in variable costs (label this TC2 ) (3 marks) (ii) the new break-even point (label this a on the diagram). (1 mark) (iii) the new fecast profit as a result of the increase in variable costs, based on Zoe s estimate of 225 parties per annum (label this bc on your diagram). (2 marks) bc (alternative) 1(e)(i) Crect answer = TC2 line (3 marks) F crect intersection with Y axis (at 15 000) F crect TC value above 225 units of output (at 30 750)** **Accept answers between 28 000 and 31 500 F recognising an increase in the gradient of the TC line (1 mark) (1 mark) (1 mark) 1(e)(ii) 1(e)(iii) Crect positioning of a, where TC2 = TR (1 mark) Accept answers that show a on the Y axis hizontally from point a answers that show a on the X axis vertically below a. Either crect positioning of bc : Vertical line between TR and TC2' (1 mark) Or crect positioning of bc alternative ( 14 250) (1 mark) Plus vertical line point (f bc alternative) above 225 units of output (1 mark) 7
2 Total f this question: 40 marks 2 (a) Analyse two possible reasons why Zoe chose to use personal finance rather than a bank loan. (10 marks) Level Descript Marks L5 Good application AND Good analysis 10 9 L4 L3 L2 Good application AND Reasonable analysis Good analysis AND Reasonable application Reasonable application AND Reasonable analysis Good application Good analysis Reasonable application Reasonable analysis 8 7 6 5 4 L1 Limited response 3 1 Up to a maximum of 2 marks f a definition of personal finance OR bank loan. Personal finance: money that is provided by the owner (1 mark) from their own savings, family personal wealth/assets (1 mark). Bank loan: a sum of money provided to a firm individual by a bank (1 mark) f a specific, agreed purpose (1 mark). Also accept: on which interest is charged as an alternative to the first element of the above sentence. Possible reasons f Zoe choosing personal finance might include the following: Zoe was able to meet the start-up costs through the 6000 browed from her parents it is possible that her parents will charge zero low interest on the loan whereas the bank charges a high interest the bank manager refused a two-year loan. Using personal finance would avoid a situation whereby Zoe was having to pay back all of the bank loan within her first year of trading Zoe would struggle to provide a guarantee (security) f a bank loan Zoe would be debt free earlier as she would have a cash surplus by the end of the first quarter. Possible lines of analysis: Zoe wanted to limit risk and this could be achieved by being debt free. The insistence on a one-year loan by the bank manager would have put pressure on Zoe in her first year of trading; this is usually a difficult time f a new entrepreneur. personal finance would mean that Zoe would not need to provide a guarantee and pay high interest, both of these facts would have negative effects on her business. 8
2 (b) Zoe believed that she conducted her market research well. To what extent do you agree? Justify your view. (15 marks) Level Descript Marks L5 Good application AND Good analysis 10 9 L4 L3 L2 Good application AND Reasonable analysis Good analysis AND Reasonable application Reasonable application AND Reasonable analysis Good application Good analysis Reasonable application Reasonable analysis 8 7 6 5 4 L1 Limited response 3 1 Definition: 1 mark f concept of getting infmation and 1 mark f concept of using infmation. Market research is the systematic and objective collection of data (1 mark) and the analysis of that data in der to assist the marketing process (1 mark). Strengths of Zoe s market research: she used her own experience, and that of her contacts in nearby towns, in der to understand the entertainment needs of the customers she was able to get a projection of sales through the advice of her contacts Zoe used a questionnaire, in particular to research party bags, and her replies helped her decision making she learned that fixed prices might not be possible as customers would haggle, but that she could set prices higher than she had previously her adviser provided detailed financial data. Weaknesses of Zoe s market research: most of her research was based on her own ( contacts ) experience and this might not apply to the new situation she was facing her party bag research sample was biased, as it only used existing customers Zoe did not appear to undertake market research into the state of the market and possible influences on demand she appeared to decide on party bags befe researching this option, although she did then conduct some research overall, her sample sizes appeared to be limited and only included previous customers who knew her personally. Possible lines of analysis: new market research was less vital because of her previous experience in this field her infmation came from limited sources and may not have been free from bias, thus affecting the reliability of her results. 9
Evaluation Zoe s pri experience gave her a reasonable understanding of many features of the market. However, her market research into full-time employment seemed to be very restricted, suffering from both bias and low sample numbers, reducing its reliability. However, as she was continuing to build on her part-time business this may not have been a maj issue. Although her market research was limited it did build on the good level of understanding that she had acquired befe the full-time business commenced. F Evaluation, you should award marks using the grid below. Note: Evaluation also assesses students quality of written communication. When deciding on the level to be awarded, consider the degree to which the student ders his/her ideas. Level Descript Marks E3 E2 E1 Judgement with well suppted justification. Answer has a logical structure throughout with effective use of technical terms. Judgement with limited attempt at justification. Evidence of a logical structure and some use of technical terms. Assertion judgement which is unsuppted. Limited evidence of a logical structure and little use of technical terms. 5 4 3 2 1 10
2 (c) In May 2012, Zoe stated, The business is failing to reach its targets at the moment but the reasons have been outside my control. Do you agree with Zoe s statement? Justify your view. (15 marks) Level Descript Marks L5 Good application AND Good analysis 10 9 L4 L3 L2 Good application AND Reasonable analysis Good analysis AND Reasonable application Reasonable application AND Reasonable analysis Good application Good analysis Reasonable application Reasonable analysis L1 Limited response 3 1 Reasons f failure that were outside Zoe s control might include the following: the car breakdown led to a loss of goodwill that was arguably a result of bad luck economic difficulties led to a general decline in demand f party entertainment the supplier s strike led to complaints and a loss of goodwill that were not due to Zoe s actions the new supplier s party bags were sub-standard, despite good reviews the party bag supplier increased the price that Zoe was charged. 8 7 6 5 4 Reasons f failure that were within Zoe s control might include the following: Zoe continued to use party bags that she knew were sub-standard Zoe chose to buy a cheap car and should have realised that this might cause problems. She appeared to have no back-up plan, missing parties rather than priitising attendance at the parties Zoe did not seem to have planned f wst case scenarios as she did not seem to have solutions to any of the problems that arose once her business had started. Possible lines of analysis: Some facts that contributed to Zoe s difficulties, such as the car breakdown, might be categised as within Zoe s control (eg she bought a cheap car) outside her control (eg the breakdown was just bad luck). Credit should be given to the quality of the argument presented by the candidate and so the categisation of the bullet points above should be treated with some flexibility. Evaluation On the whole, external/unexpected facts seemed to contribute towards Zoe s failure. However, it could be argued that all of these events were possible and so, although she was not initially at fault, her inability to deal with them was a significant weakness. 11
F Evaluation, you should award marks using the grid below. Note: Evaluation also assesses students quality of written communication. When deciding on the level to be awarded, consider the degree to which the student ders his/her ideas. Level Descript Marks E3 E2 E1 Judgement with well suppted justification. Answer has a logical structure throughout with effective use of technical terms. Judgement with limited attempt at justification. Evidence of a logical structure and some use of technical terms. Assertion judgement which is unsuppted. Limited evidence of a logical structure and little use of technical terms. 5 4 3 2 1 12